Part of a gift from a Roth IRA withdrawal will fall under the $18,000 annual exclusion, meaning that portion of the gift will not be subject to gift tax.

Q: My wife’s father is making a $240,000 withdrawal from his Roth IRA and will distribute it equally to four of his five children ($50,000 each), and he will be forgiving some debt owed by the fifth child of approximately $40,000. What are the tax ramifications for my father-in-law, my wife and each of her siblings ?

A: Your wife's father will owe no income tax on the withdrawal since he is withdrawing from a Roth IRA.

When he makes the $50,000 gifts to four of the children, part of the gift will fall under the $18,000 annual exclusion, meaning that portion of the gift will not be subject to gift tax. If he is married and his spouse joins in making the gift, the exclusion doubles to........

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